High Risk vs Low Risk Merchant Accounts – PayFasto



high vs low risk

What’s the difference between high risk and low risk merchant accounts?

The difference is that high-risk merchant accounts are for businesses with higher chances of financial issues, like chargebacks. They face higher fees and tighter rules. Low-risk accounts, on the other hand, cater to more stable businesses, giving them better rates and terms.


But High-risk merchant accounts differ from regular merchant accounts in several ways though. Let’s take a brief dive into some of these key differentiators.

Longer Application Process 

When applying for a standard or regular account for your small business, approval is guaranteed in a matter of minutes or even seconds. However, this isn’t the case with high-risk merchant accounts. Applicants for high-risk merchant accounts are subjected to a detailed review of the application documents. 

This review covers the cross-examination of the risk profiles and studying the pattern of finances, business processing history, personal credit history, and other vital documents. This is to ensure that the applicant is free from bad credit or poor levels of partnerships or business history, thus ensuring that approval is granted to businesses with genuine and authentic documents and profiles.

Higher Payment Processing Fees

Payment processing fees for a standard small business are competitive as it stands at 0.3% above the interchange rate. On the other hand, a high-risk merchant account has a processing fee of 1.5% above the interchange rate. 

With these rates, standard small businesses will pay $1.16 for a $50 charge, while a payment of $1.76 will be levied on a $50 transaction for a high-risk merchant account. Although, interchange fees vary significantly from one payment company to another, high-risk merchant account generally incurs high payment processing fees.

Cash Reserve Requirements

When comparing standard accounts with a high-risk merchant accounts, one of the significant differences is the cash reserve requirements. Usually, some payment processing service providers hedge specific amounts of cash for a business. The threshold of this reserve can be baked into the payment process using some popular methods, including capped reserve, upfront reserve, and rolling reserve.

Capped Reserve: This is where the payment processing service provider holds a specific amount of processed payment until the total balance attains a predetermined level. In this case, contributions based on transaction stops, leaving the reserve to remain until it is needed. 

Upfront Reserve: This form of cash reserve requirement involves a specific amount being sent to the payment processing service provider from the merchant upfront. Sometimes, all completed transactions are withheld until the specified amount is received. 

Rolling Reserve: In this case, a payment processing service provider sets aside a specific percentage of every completed transaction, which could be as high as 10%. For instance, if you have a 6-month rolling agreement, you’ll receive the balance in July if your agreement starts in January. And then, in January, you’ll receive another balance.

Higher Chargeback Fees

There might be some situations where businesses are required to refund their customers. This refund process requires businesses to run chargeback fees to their payment processing service providers. Businesses with high cases of chargebacks often require higher fees than offset the risks associated with excessive chargebacks. The rates are usually between $20 and $100 per chargeback.

Volume Caps In Credit Card Processing

There are certain limits you should not cross when processing transactions, and one of them is not to cross the limits. You may be barred from processing further transactions if your sales volume exceeds a specified limit. For most processors, there’s a presumption that there may be compounded risk, especially when dealing with high-volume transactions.

Additional Technical Requirements

With a high-risk merchant account, you may be subjected to additional technical requirements, depending on your business type. For instance, if you are in an age-specific business, you may be required to utilize additional technical tools. This ensures that you’re selling to the right target audience, not underage customers. Without fulfilling these requirements, your high-risk merchant account application may not be approved.

Why is PayFasto the Best High-Risk Merchant Account Provider?

Are you on the lookout for the best high-risk merchant account provider? Look no further. PayFasto is the perfect go-to service provider for your company. We are a B2B merchant payment processing platform providing high-risk payment processing solutions to companies and businesses, thus helping them attain their greatest potential. With our award-winning payment gateway, all your needs are fully covered.

Our Unique Features

World Class Support

Our support teams at PayFasto are highly skilled, knowledgeable, and experienced in helping companies and businesses with high-risk payment processing tasks. From solving your account processing issues to integration support, count on us to take complete control of your high-risk merchant account payment processing journey.

Safety & Protection

At PayFasto, we have the requisite industry security certifications, and our payment processing company is equipped to help you get them as well. We do not only protect you from chargebacks, fraud, or scams, but we also protect your customers and clients. Our strategic fraud prevention tool and chargeback mitigation tools are enough to guarantee safe and secure transactions for you and your customers.

Market Leadership

At PayFasto, we know the hurdles associated with choosing a high-risk merchant account and other factors, such as onboarding and customization. Hence, choosing us as your payment processing partner will save not only your time but your money too.

Custom Integration

Many times, integration could be a bottleneck. Therefore, it is essential to partner with a payment processing provider with the proper custom integration to troubleshoot any hang-ups quickly and efficiently along the way. PayFasto remains your best bet.

No Hidden Fees

With PayFasto, you will always be aware of the fees upfront. Our website features the monthly maintenance costs of your high-risk credit card processing and merchant account. This helps us boost our reputation as a transparent and accountable payment processing service provider.

Self-Check: Are You a High Risk Merchant?

People don’t usually like taking risks in life and especially not with their money. This is the same for most merchant account providers. So, how do you know if a bank or merchant account provider will issue you an account? How can you tell if you’re looking for a low or high risk merchant account? It’s nothing to do with what type of person you, but everything to do with the  business you run.

How many of these factors apply to you?

  • The industry my company is in has a high chargeback ratio and high refunds amounts
  • My company is new and looked at as a start up
  • I, the owner, don’t have a good credit score (applies more to the USA)
  • Most of my customers buy months in advance and the product or service is consumed much later (such as an airline or ticket vendor)
  • I sell a digital service that has no hard product
  • My payment model is free trial and/or recurring

If you answered yes for more than one, you’re most likely a high risk merchant by service providers. That being said, the difference between high risk and low risk isn’t always black and white. That’s why at Purepay, we don’t automatically reject merchants in industries that are usually considered high risk. We work with you to find the best solutions that match your business type.

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What being High Risk means for you

Some service providers specialize in high risk merchant accounts, but they have to charge higher fees and offer terms and conditions that are less advantageous for their customers. . If you’re a high risk business, you can expect to:

  • Pay higher fees and additional charges
  • Rolling reserve typical 6 months
  • Chargeback thresh hold that cant be hit so its important to maintain your business
  • Slower payouts, most likely with a hold

Is it Possible to Become a Low Risk Merchant?

Like we mentioned above, most of the factors that make you a high risk business aren’t things you can change—like the industry you’re in, or the way customers use your products. . If you think you might be a high risk merchant, do what you can to reduce risk before you bring your application to the underwriters’ attention, and go through your financial statements, business model, and credit scores.

Regardless of your official classification, there are steps you can take to lower your risk:

  • Reduce your risk of chargebacks with strong fraud prevention tactics
  • Focus on generating stable streams of revenue instead of occasional streams of large revenues
  • Demonstrate your ability to keep up with high trading volumes

Although you may be high risk on paper, we have come to understand that it doesn’t always mean you are a high risk merchant. Summer camps are a great example of businesses that are high risk on paper, but are actually considered relatively low risk in our books.

Even if you’re high risk on paper, it’s worth checking to see if we’ll be able to set you up to accept payments. Your journey to becoming the next star in your industry has only begun and Purepay will be here to help you along the way.

Whether you do high risk or low risk, apply with us today to get the lowest fees on the market and the best service!

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